Statement of the IMF Mission for Colombia

An International Monetary Fund (IMF) mission headed by Mr. Benedict Clements, Division Chief in the Western Hemisphere Department, issued the following statement today in Bogota:

"An IMF team has been in Colombia over the past week for the mid-year staff visit as part of the Article IV surveillance process. The team held discussions with the authorities and private sector about recent economic and financial developments and the near-term outlook.

"Since 2003, Colombia's growth performance has been very strong. Last year, the economy grew by close to 7 percent and preliminary first quarter indications from industrial production and retail sales suggest that economic activity remains vigorous this year. In the context of rapid demand growth and an uptick in inflation over the past year, the authorities have been taking measures designed to keep inflation low, so as to sustain robust growth over the medium term. The Central Bank has raised its policy interest rate by 275 basis points, and the government has achieved greater fiscal savings and reduced the combined public sector deficit in both 2006 and 2007 below original objectives. The authorities' commitment to macroeconomic stability over the past several years has underpinned rising confidence in Colombia's long-term economic prospects and strong growth in investment, including from abroad. Improved fundamentals have also been reflected in rising capital inflows and a strengthening of the peso.

"The team agreed with the authorities that the main economic challenge today is to keep fiscal and monetary policies oriented to medium-term growth with low inflation. The IMF team noted the importance for this effort of a monetary policy aimed clearly at meeting the inflation objective, with a flexible exchange rate. At the same time, a further strengthening of fiscal policy-beginning already in 2007-would ease the burden on monetary policy of containing demand pressures, and reduce the need for administrative measures."